Big-Cap Blowup

	Bernie Schaeffer Schaeffers Research.com
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There are many examples when "bigger" isn't necessarily "better." Diamond rings. Steaks. Bottles of perfume. And, for the past several months, equities. I've made numerous warnings against the supposed "safety" of these overloved and underperforming big-cap names, dating back to March of last year, on SchaeffersResearch.com.

While definitions of "cap" size vary depending on brokerage firms, a general guideline is that "mega-cap" names boast market capitalizations of $200 billion or more, while "large-cap" names are those companies with market caps between $10 billion and $200 billion. In the S&P 500 Index (SPX), seven names have achieved "mega-cap" status. I took a look at these equities, along with the 11 SPX members that have market caps of between $100 billion and $200 billion.

Over the past 52 weeks, these combined 18 names have lost an average of 0.85 percent, which trails the SPX's 52-week gain of 3.70 percent. And haven't we been told time and again that the large blue chips are supposed to be leading this market? Year-to-date, the massive-caps have continued to sag, dropping an average of 1.84 percent, a tad ahead of the SPX.

But if you remove the energy names (some of the only big-caps I would recommend) - XOM and CVX - you're left with an average 52-week return of -4.87 percent and a year-to-date drawdown of -3.60 percent. A peek at oil's return over the time periods at hand reveals why XOM and CVX remain safe bets. Black gold has gained almost 40 percent so far this year, and is up 20 percent from one year ago.

Technically speaking, things are still looking murky for most of these securities, as eight of the 18 names are still trading beneath their 200-day moving average (closing prices highlighted in red).

What's even more disturbing to me is the sustained love affair investors and analysts are having with these stocks, even as their portfolios continue to suffer dire consequences. The table below details sentiment indicators for these 18 names. Most striking are the analysts' ratings. Of 360 total rankings on these stocks, 65 percent are of the "buy" variety, while just three measly percent are outright "sells." And one of the most underloved names? The rallying CVX. Go figure.

While options players aren't overly complacent, I would like to see a little more bearishness on these names, particularly PG, MO, and MSFT. And short sellers continue to ignore the big-caps, as the average short-interest ratio for these names is a paltry 2.38 days to cover. As a result of these sentiment readings amid soggy price action, the majority of these names still hold Schaeffer's Equity Scorecard ratings below 5.0 (on a scale from zero to 10.0), as shown in red below.

If I've said it once, I've said it a thousand times (OK, maybe a couple of dozen). Stay away from the false sense of security offered up by the big-caps. Consider energy and utilities names. And don't be afraid to have some of your portfolio devoted to the true safety of cash.

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